Koror—While President Donald Trump’s proposed $54 billion in extra spending for the Department of Defense may have provided the offset language needed to fund the Compact Review Agreement, the recent threat by North Korea to launch four intermediate ballistic missiles near Guam highlighted Palau’s strategic military value in the region. It also comes at a time when the U.S Congress will consider approval of the amended compact agreement after its August recess.
“Palau is indispensable to our national security and funding the compact is key to our strategic presence in the region,” says the Defense Department’s 2018 budget request. But the House Armed Services Committee initially didn’t consider Palau important enough for the $129 million funding transfer from the DOD budget to the Interior Department.
On Sept. 3, 2010, Palau and the United States signed the Compact Review Agreement, which would extend financial assistance to Palau amounting to $250 million for public safety, health, and education, to build and maintain infrastructure, to pay debts, and to increase the Compact Trust Fund for the future. The assistance would be extended until Sept. 30, 2024.
But despite repeated assurances from U.S. officials, backing from Senator and 2008 presidential candidate John McCain, and strong support extended by the State and Defense Departments, the agreement remains languishing in the U.S Congress.
The main sticking point for the agreement was the inability of the executive branch and the Congress to pay the cost of the agreement to be offset by equivalent decreases elsewhere.
Previous attempts by the Congress to approve the Compact Review Agreement were unsuccessful. A House of Representatives’ Subcommittee voted unanimously to approve the Compact in July 2012, but it never moved out of the full committee. An attempt to insert a funding amendment for the Compact in a bill appropriating money for Hurricane Sandy relief in 2012 was voted down by the U.S. Senate, 51-44, where it required 60 votes in order to pass.
Currently there are two bills pending before Congress to implement the 2010 agreement. Bill H.R.2810 — the National Defense Authorization Act for Fiscal Year 2018 sponsored by Rep. Mac Thornberry, introduced in June, and Senate Bill S.1519 –- National Defense Authorization Act for FY 2018, sponsored by Sen. John McCain, introduced in July.
The House, which seems to have agreed with the President Trump’s funding request for the Compact, has approved their version of NDAA, which was received by the Senate on July 25, with a motion to proceed to consideration of the measure.
“There is authorized to be appropriated for fiscal year 2018 $123,900,000 to the Secretary of the Interior, to remain available until expended, for use in meeting the financial obligations of the Government of the United States under the Agreement between the Government of the United States of America and the Government of the Republic of Palau under section 432 of the Compact of Free Association with Palau,” states the House Bill Section 1263.
The Congress is scheduled to resume their session on Sept. 5 after their August recess.
In the NDAA, President Donald Trump requests a budget of $123.9 million of discretionary Department of Defense appropriations to be transferred to the Department of the Interior to support enactment of the 2010 Compact Review Agreement with Palau. The funding request is part of the $11.7 billion FY 2018 budget for Interior.
"The Territories and Freely Associated States are absolutely critical to the strategic readiness of the United States, and they are part of the fabric of who we are as fellow Americans," said Interior Secretary Ryan Zinke. "President Trump's budget proposal makes it abundantly clear that these lands, often on the front lines of escalating tensions, are under our protection and serve vital importance."
In 1994, the United States and the Republic of Palau established a Compact of Free Association ending 49 years of direct American administration under the auspices of the U.N. Trusteeship Council.
The Compact Agreement established the trust fund which is intended to provide Palau $15 million in annual payments from 2010 to 2044, when the U.S. direct economic assistance will be zeroed-out.
The revised Compact Review Agreement does not change the fundamental provisions of the original Compact; however, it does gradually reduce the financial support provided by the U.S. and extends the life of the direct economic assistance to 2024.
The Congressional Government Accounting Office estimates that Palau received a total of $852 million between 1995 and 2009—the first 15 years of the Compact.
Under the Compact, citizens of Palau are granted uninhibited access to reside and work in the United States and its territories, and eligibility to volunteer for service in the U.S. Armed Forces. In return, the agreement allows the United States to operate armed forces in Palau, to demand land for operating bases, and excludes the militaries of other countries without U.S. permission.
The delay by the U.S side to approve the amended Compact led to frustrations for the Palau leadership.
"Palau's ‘compact' situation is frustrating and actually embarrassing," President Tommy Remengesau said, recalling that in 2010 the U.S. had agreed that Palau would receive $250 million but that the Congress had never delivered the money.
Daniel Russel, who served as U.S. assistant secretary for East Asian and Pacific affairs at the State Department, told the Palau Congress in 2016 that the Compact was rock-solid but admitted that delays had become "very burdensome."
“While we continue to support all of our U.S. Insular areas, we have long been striving to meet our commitments to the Republic of Palau,” said Acting Assistant Secretary Nikolao Pula in a press release. “President Trump’s strong support for the Palau Compact shows that he recognizes the strategic importance of our U.S. territories and the Freely Associated States,” Pula said.
Lack of funding for the agreement has stalled its implementation due to a U.S. budget policy requirement that the source of funds must be identified. Despite this, Interior has been providing approximately $13 million each year to the Republic out of its discretionary fund in lieu of the implementation of the agreement since 2011.
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